Can a new company or SPV get a private loan? What lenders ask for, who must guarantee, who should own the property and where the Credit Code fits.
Business Owners Hub
New Company Loan · SPV Borrowing · Director Guarantees
A company registered last month has no tax returns, no trading history and no credit track record. So how does a private lender decide whether to fund it? This insight covers what the lender looks at instead, the documents it asks for, who has to guarantee, who should own the property and where the National Credit Code fits.
Quick Answer
A newly formed company or special purpose vehicle can borrow from a private lender, because the lender relies on the property security and the directors standing behind the company rather than on the company's own trading history. Expect the directors to sign a directors guarantee, a full set of company and trust documents to be checked, and a business purpose that is clear on paper before a private lending offer is issued.
Also called: special purpose vehicle, single purpose company, project company. All three describe a company set up to hold one property or run one project, usually with no other trading activity.
Can a new company or SPV borrow from a private lender?
A new company or SPV can borrow from a private lender, because a private lender is lending against property and people, not against the company's financial statements. A bank usually wants trading history it can assess. A private lender looks through the company to what stands behind it. Put simply, a new company is judged by the people behind it.
In practice, the assessment of a fresh company comes down to three things:
- The security property. Its valuation, how easy it would be to sell, and the loan size against it. This carries most of the weight in private lending.
- The directors and shareholders. Their credit files, their other assets and debts, and their experience with the kind of project the company is taking on.
- The way out. A believable exit strategy, such as a sale, a refinance once the company has some history, or a settlement of funds owed to it.
The company being new is rarely the problem on its own. How long the ABN has been registered, and how property security changes the answer for a new ABN, is covered in the guide to a new ABN business loan with property security. If the plan is to borrow from a person you know rather than a lender, see a private loan from an individual. And where the company does have some trading behind it and wants an unsecured or bank-style facility, the options sit with business loans.
Whose credit file does the lender check for a new company?
The lender checks the directors, and often the shareholders, because the company has no file worth reading yet. A company search will show when it was registered and who controls it, but the personal files of the people behind it do most of the work. Which file is checked for each type of entity is set out in small business credit reports by entity type.
What is an SPV and why do borrowers use one?
An SPV is a company set up for one purpose, usually to hold a single property or run a single project, and borrowers use one to keep that project separate from everything else they own. The rule most advisers work to is one project, one company.
The common reasons we see business owners set one up:
- Ring-fencing. If the project goes badly, the trading business and other properties are not on the same balance sheet.
- Partners. Two or more parties each hold shares in the SPV, which is how many small joint venture property developments are structured.
- A clean set of books. One bank account, one set of costs, one result. Lenders find this easier to follow, and so does the accountant at year end.
- A cleaner exit. When the project sells, the loan is repaid from one entity and the company can be wound up or reused on purpose.
The ring-fence is only partial. Because the lender will usually ask the directors to guarantee the loan, the people behind the SPV are still on the hook if the security falls short. The SPV separates the assets, not always the liability.
What documents does a private lender want from a new company?
A private lender wants proof that the company exists, who controls it, who owns it and what it is borrowing for, plus identification for every person signing. When a company is registered, ASIC issues it an Australian Company Number and a certificate of registration, and its officeholders and shareholders sit on the public register; ASIC explains the steps in Register a company. The lender then runs its own search to check that the register matches what you have told it.
| Document | Why the lender asks | What commonly slows it down |
|---|---|---|
| Company search and certificate of registration | Confirms the company exists, when it was registered, and its directors, secretary and shareholders. | A director or shareholder change made but not yet lodged, so the register and the application disagree. |
| Constitution, or confirmation the replaceable rules apply | Shows how the company signs documents and whether anything limits its power to borrow or give security. | An off-the-shelf constitution nobody has read, or a sole director company signing as if it had two. |
| Share register and shareholder details | Identifies who owns the company, so the lender knows who else may need to guarantee. | A shareholder who was never mentioned, or shares held by another company or a trust. |
| Trust deed and any variations, if the company is a trustee | Confirms the trustee can borrow and give security, and who the beneficiaries are. | An unsigned, unstamped or missing deed, or a trustee change that was never documented. |
| ABN and GST registration | Supports the business purpose and shows the entity is set up to trade or invest. | An ABN held by the trust rather than the company, or the other way around. |
| Identification for each director and guarantor | Identity checks on everyone who signs, plus their personal credit files. | A guarantor overseas or unavailable to sign in front of a witness. |
| Contract, project documents and exit plan | Shows what the money is for and how it will be repaid. | A joint venture or shareholders agreement still in draft when the loan is due to settle. |
Where the company acts as trustee, the trust deed is often the document that decides how fast the file moves. The new company deals we see stall at this stage are usually waiting on a deed, a variation or a shareholder detail rather than anything about the property. Having the full set ready on day one is the single biggest thing you control, and the wider list of what helps a lender move quickly is in what private lenders need to fund fast.
Who has to guarantee a new company's private loan?
The directors almost always have to guarantee a new company's private loan, and the lender may also want guarantees from shareholders, a corporate trustee's directors or anyone whose property is being offered as security. In other words, the directors sign twice: once for the company as borrower, and once personally as guarantors under a directors guarantee.
A guarantee means that if the company does not repay, and selling the security does not clear the debt, the lender can pursue the guarantor for the shortfall. With an unlimited guarantee, that can reach the guarantor's own assets, including their home, usually after court action. Some lenders also take a mortgage over a guarantor's property as extra security, which is a different and larger commitment; how that works is set out in using someone else's property as security.
Most private lenders want each guarantor to get independent legal advice and have their solicitor sign a certificate saying so, particularly where a guarantor is not a director or will not benefit directly from the loan. How personal guarantees work across private loans generally is covered in the guide to how private lending works.
Guarantee set-ups that move
- Every director and shareholder named up front
- Each guarantor has their own solicitor lined up
- Guarantors' assets and debts disclosed in full
- Spouses who own the security told early, not at signing
Guarantee set-ups that stall
- A silent shareholder found on the company search
- One solicitor trying to advise every guarantor
- A guarantor who expected not to sign anything
- A non-director spouse asked to guarantee at the last minute
Does it matter if the SPV owns the security property?
It matters who owns the security property, because ownership changes who signs the mortgage, who carries the risk and what tax and duty apply, even though the lender values the property the same way either way. Who owns the security matters more to the paperwork than to the loan size, which still turns on the valuation and the loan-to-value ratio.
There are three common set-ups. The SPV owns the property it borrows against, and the lender takes a first mortgage over it directly. A director owns the property personally and offers it as third-party security for the company's loan. Or a related trust or company owns it, which raises its own questions covered in property held in a trust or company as security.
| Question | SPV owns the security | A director owns the security |
|---|---|---|
| Who signs the mortgage? | The company, as borrower and mortgagor. | The director personally, as a third-party mortgagor, as well as guarantor. |
| How is the property valued? | On its own merits, the same as any security. | The same. Ownership does not change the valuation. |
| What extra care does the lender take? | Checks the company's power to give security and the trust deed if a trustee holds it. | Takes more care if the property is the director's home, and usually insists on independent legal advice. |
| Does duty or land tax change? | Can do. Moving a property into the SPV may trigger duty, and some states treat companies and trusts differently for land tax, varies by state. | No transfer is needed to offer it as security, but the property stays exposed to the company's loan. |
| What happens at the exit? | The SPV sells or refinances and the mortgage is discharged from one entity. | The director's property stays mortgaged until the company's loan is repaid or refinanced. |
For most business owners it is a trade-off between cost now and exposure later. Transferring a property into a new company can be expensive, and leaving it in a director's name keeps a personal asset tied to the company's debt. The right answer depends on duty, land tax and the longer plan for the property, which is a conversation for your accountant before the loan is structured, not after.
Does the National Credit Code apply when a new company borrows?
The National Credit Code generally does not apply when a company borrows, because the Code covers credit to individuals and strata corporations, and only where the money is mainly for personal, domestic or household use or to buy, renovate or improve residential investment property. A genuine company borrowing for a project, an investment or a trading business sits outside it, even though the same residential investment loan made to you personally would usually be regulated. Private lenders rely on that, which is why they care so much that the borrower and the purpose are real. What they want is a business purpose that holds up: money going into a project, a property investment or a trading business, with documents to show it.
Most private lenders ask the directors to sign a business purpose declaration, and some ask the guarantors too. What the declaration says and why lenders rely on it is covered in the guide to private mortgage lenders in Australia. A declaration on its own does not settle the question if the facts point the other way.
Why do shelf companies set up for one deal draw scrutiny?
A shelf company bought the week before an application draws a closer look, because lenders know a company can be used to dress up a personal loan as a business one. Shelf company, real scrutiny is how it plays out. If the money is really going towards a home the directors will live in, or to pay household debts, a lender may decline, ask questions or treat the loan differently, varies by lender. A new company used for a genuine project is fine. A new company used to get around consumer lending rules is the file most lenders walk away from, and whether the Code applies to a particular arrangement is a question for your solicitor.
A new company or SPV can borrow privately because the lender looks through it to the property, the directors and the exit. Expect a full document check on the company and any trust it acts for, guarantees from the directors and often the shareholders, independent legal advice for each guarantor, and a business purpose that stands up on paper. Decide who should own the security with your accountant before the loan is structured, and if the company sits inside a wider business, start from the Business Owners Hub.
Key takeaway: get the company documents, guarantors and business purpose in order before you ask for terms, because that is what a private lender checks first on a company with no history.Frequently Asked Questions
Anyone who can set up a company can set up an SPV, because in Australia an SPV is usually just a company registered with ASIC for one purpose. Business owners, investors and joint venture partners commonly use one, often with an accountant or solicitor handling the registration. Many small joint venture property developments are run this way.
You can buy residential property through a company, and many investors and developers do, though duty, land tax and lending terms can differ from buying in your own name. Lenders want the purchase to be for investment or development rather than a home the directors live in. The guide to private mortgage lenders explains how business purpose is tested, and your accountant should confirm the tax position first.
A special purpose vehicle trust is a trust set up for one project or one property, usually with a newly registered company acting as its trustee. The lender then deals with the company as trustee and checks the trust deed to confirm it can borrow and give security. How lenders treat property held this way is covered in property held in a trust or company as security.
A company with no trading history can often get a private loan, because a private lender relies mainly on the property security, the directors and the exit plan. The directors' credit files and personal guarantees take the place of the company's track record. Terms and loan size vary by lender and depend on the property.
A director will almost always have to personally guarantee a private loan to a new company, because the company has no history or assets of its own for the lender to rely on. Shareholders and anyone offering their own property as security may be asked to guarantee too, usually after independent legal advice. How guarantees fit into a private loan is set out in the guide to how private lending works.
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